Mirabela Nickel (MBN)

Morningstar has upgraded
Mirabela Nickel
to “buy" from “accumulate" following the stock’s underperformance due to the fall in the nickel price and the miner’s stretched balance sheet.

The stock has been very volatile in recent months as nickel prices tumbled below $US8 a pound, raising speculation that the company will run into funding issues.

But Morningstar sees value in the stock despite these concerns as it expects the miner to grow concentrate production to 20,000 tonnes this year at a cash cost of $US6 a pound, and calls Mirabela’s Santa Rita project a “rare long-life asset".

The stock looks cheap even when the investment research agency incorporates a highly dilutive capital raising and puts in more conservative long-term assumptions into its valuation. Morningstar’s fair-value estimate falls by 50 per cent to 75¢ a share, but that is still some way above the current share price of around 34¢ a share.

However, Morningstar warns the stock is only suited for high-risk tolerant investors only.